The last US sanctions attack on Russia became the most sensitive

The Russian stock market did not react so nervously to sanctions earlier, although, for example, the sectoral sanctions of 2014 limited the ability of the largest Russian banks and energy companies to raise funds from international capital markets. The sale, which investors arranged on Monday, April 9, is comparable only to the collapse of the market on March 3, 2014, when the Federation Council gave the Russian president the right to use the Armed Forces abroad, i.e. in Ukraine. The decision that triggered the events that led to the sanctions, and the latest US measures, provoked the collapse of the Russian indices by about 10% (see the article on page 10).

On April 6, the US Treasury Department imposed sanctions against 24 Russians - large businessmen and high-ranking officials - and 15 companies. The most affected was Oleg Deripaska: eight of his companies were included in the list, including UC Rusal, En +, "Russian cars" and GAZ, agroholding "Kuban".

Representatives of the Russian government have already said that it will support the companies that have fallen under the sanctions. "In the current situation, with the deterioration of their situation, of course, we will [provide this support] and discussed some things beforehand," said Deputy Prime Minister Arkady Dvorkovich. And Prime Minister Dmitry Medvedev instructed him to work out the issue of support.

What's the Difference

The first sanctions against Russians, which, in the opinion of the United States and the European Union, are responsible for the Crimea's annexation and armed conflict in the east of Ukraine, were introduced in the spring of 2014. These are Specially Designated Nationals (SDN): the assets of these people and organizations in the US are blocked , persons from the United States are prohibited from having any business with them, persons are prohibited from entering the United States. But then basically there were officials, deputies, people from, as it was said in the documents of the US Treasury, the entourage of President Putin and their company (Bank Rossiya, SMP Bank, companies of the Rotenberg brothers and Kovalchukov, etc.), Russian companies from the defense sectors or those that worked in the Crimea or with him. There were no loud stories about the blocking of their assets in the US. And in Italy the real estate of Arcadia Rotenberg was arrested.

Subsequently, the US sectoral sanctions, in particular, prohibited US individuals from granting long-term debt financing to certain energy companies and banks from Russia, primarily state (Rosneft or VTB). Also, the US banned US companies from transferring high technology to Russia that could be used in the defense sphere, and to cooperate with Russian companies in the extraction of shale oil, deep-sea mining and extraction on the Arctic shelf.

The latest sanctions are more powerful than SDN and even sectoral sanctions, says Eric Ferrari, the head of the Washington law firm Ferrari & Associates: this is a complete ban on Americans for any relationship with those who fall under them (and these are large commercial companies). The basis for sanctions against cooperating non-Americans is created, and this is a new factor introduced by the law adopted in 2017 on countering US adversaries through sanctions - CAATSA, Ferrari points out: "Sectoral sanctions, albeit more complex, are smaller in scope and consequences."

"Sectoral sanctions to a lesser extent undermine the legitimate commercial activities of those who fell under them," agrees Anna Bradshaw, partner of the British law firm Peters & Peters Solicitors, specializing in particular on sanctions issues.

The current measures are stronger for the selected goals, but probably will not significantly affect the Russian economy as a whole, as sectoral sanctions affected, says Brian O'Toole, a senior fellow at the Atlantic Council, who in the past was engaged in sanctions issues at the US Treasury.

What is prohibited

According to new sanctions, any American people should cease all commercial relations with listed companies - as well as with those of their subsidiaries, where they own at least 50%. This applies to both business relations (for example, the supply of goods, the performance of contracts, etc.), and the work of American citizens in these companies, as well as the ownership of American stocks and bonds, the provision of loans (the latter concerns three companies - Rusal, En +, GAZ) .

In addition, under the CAATSA law, any non-US persons who commit "significant transactions" with persons on the SDN list and foreign financial institutions that carry out "significant financial transactions" with them may be subject to secondary sanctions. In fact, Russian individuals and companies that have fallen under United States sanctions are excommunicated from the dollar system, Bradshaw points out, any payment in dollars passes through the territory of the United States, the transaction involves counterparty banks that will not be able to deal with Russian companies on the sanctions list. "A significant operation (in any currency) with a sub-entity creates a risk for non-US individuals of secondary sanctions," she warns.

There are some dollar transactions that do not pass through the US, but there are not many of them, O'Toole knows.

Shares for free

On Monday, the Swiss engineering concern Sulzer decided to buy out 14.59% of the company's shares from Renova, "in order to reduce the possible consequences for its business because of US sanctions against the Russian company," Sulzer said. Renova owned 63.42% of Sulzer through the Bahamian Renova Holding. The Sulzer report notes that the company expects to buy shares at a weighted average exchange price for April 9-13 (now this package costs 525 million Swiss francs), but it intends to freeze the Renova transfer of funds for redeemable shares, it follows from the message. Representatives of Sulzer and Renova did not answer the questions of Vedomosti, will they receive the last money for the package in the company.

Thus, there are risks that Russian companies will not be able to pay off dollar debts. UC Rusal has already stated, in a message to investors on the Hong Kong stock exchange, that sanctions can lead to its technical default: "The company believes that its inclusion in the SDN list can lead to technical defaults on certain loans and bonded loans." The US sanctions are highly likely to have a significant negative impact on the company's business and prospects, UC Rusal said, but assured that while satisfying all the requirements to creditors, it pays interest on bonds.

In addition, the problems of Russian companies can affect the banks lending to them. For example, UC Rusal owes Sberbank $ 4.2 billion - and Sberbank risks that, as a counterparty to the company from SDN, it can fall under the same secondary US sanctions for significant financial transactions with them (see the article on page 11) .

In fact, these Russian companies will have to conduct business only in Russia, this is largely directed sanctions, O'Toole says: "Secondary sanctions can scare non-US companies. And most major European banks usually do not want to deal with anyone against whom the US has imposed sanctions. "

O'Toole believes that for non-Russian companies and banks, the risk is slightly higher than for Russian companies: "In fact, they are faced with the choice of doing business with either UC Rusal (or another sub-company) or the United States. Most will choose the United States. "

The risk has really grown, confirms Ferrari: "At the same time, I believe it is extremely unlikely that the US will impose any restrictive measures on Daimler or Volkswagen because of their cooperation with GAZ."

The probability of falling under the secondary sanctions is higher for Russian companies, not least because of geographical proximity, Bradshaw believes: "However, it will be necessary to look at what approach the US authorities will choose."

The international depository Euroclear said that it assesses the new US sanctions and takes measures to comply with them, without specifying which specific issuers and bonds are being discussed. Traders in London on Monday reported difficulties in determining the exact price of many Russian securities, provoking fears about problems in international clearing after the promulgation of sanctions, Reuters reported.

Three General Directors

In the new sanctions list, three leaders of Russian companies that were not themselves included in it. This is Andrey Kostin from VTB, Alexey Miller from Gazprom and Vladimir Bogdanov from Surgutneftegaz. Observers believe that the companies themselves are also at risk, albeit to varying degrees. "A precedent is set," Citigroup analyst Barry Ehrlich wrote in a report to clients (he is quoted by Bloomberg): if UC Rusal could get under sanctions, "this could happen to any Russian company."

"These three companies may be subject to secondary sanctions on the basis of significant transactions with their directors," says Anna Bradshaw, partner of the law firm Peters & Peters Solicitors. "And if there is any connection with the US, there is a risk for any company," says an example with ExxonMobil, which the US Treasury Department fined in 2017 for violation of sanctions, as its US subsidiaries signed an agreement with the head of Rosneft "[Igor Sechin], who was under sanctions." "Theoretically, the US can impose sanctions on foreign financial institutions carrying out significant financial transactions on behalf of persons included [in all presidential decrees on sanctions]. It is difficult to adequately assess the likelihood of this without additional analysis and research, but I can guess that potentially the measures may include sanctions against VTB for conducting significant financial transactions with Andrei Kostin, "said Eric Ferrari, head of the law firm Ferrari & Associates.

Unlike VTB and Surgutneftegaz, Gazprom is unlikely to be penalized, says Mikhail Korchemkin, director of East European Gas Analysis. This is difficult to do, since the US ally in NATO - Europe will not be able to abandon Russian gas in any foreseeable future. In any case, she will have to enter into trade deals with Gazprom, buy gas and pay for services. "It's unrealistic to see Gazprom under sanctions, but it's very likely that before the projects of the state-owned company, for example, Nord Stream-2 can get under them," the expert concludes.

What do companies do?

Neither the head of the Moscow office of an international law firm, nor a senior partner of a British law firm, could comment on Vedomosti. "Time trouble, I work with clients because of sanctions," said the Russian. "Russian customers and their counterparts," - explained the British.

Deripaska's main asset is UC Rusal. Of the $ 9.969 billion of its revenue, 79% is currency. Therefore, 92.5% of the $ 8.4 billion total debt - in dollars, the company said in a report. At Eurosibenergo, a 100% subsidiary of En +, the proceeds are mostly ruble, of only $ 4.6 billion of debt, only 12.2% is dollar.

Most of all UC Rusal should Sberbank - $ 4.2 billion, this is a means to buy a stake in Norilsk Nickel, 26.88% of the company is mortgaged on this loan. $ 1.7 billion UC Rusal in May 2017 attracted in the form of pre-export financing, the organizer - the Netherlands ING. The representative of the bank did not answer how to proceed in this situation.

Will UC Rusal convert a dollar loan into a ruble one, bank representatives and companies do not say. The interlocutor, close to Sberbank, claims that the decision will be made by the company's and bank's managers.

The cost of sales of UC Rusal - $ 7.1 billion, how many accounts for the purchase of equipment and which suppliers, the company does not report. "Some of the equipment due to sanctions will become completely inaccessible to UC Rusal, the remaining one will be 2 times more expensive," says the manager of a large investment fund: Chinese manufacturers, knowing that the company has nowhere to buy equipment, will raise prices. A former employee of UC Rusal knows that the company does not buy much American equipment, mostly Chinese analogs, so the factories will not stop because of sanctions.

Problems can arise with the carriage of goods by sea: UC Rusal carries alumina from Guinea and Australia, the former employee continues. One of the carriers of UC Rusal products is Transcontainer. "We are studying the issue of the impact of sanctions, the issue of termination of cooperation is not worth it," said Andrei Zhemchugov, first deputy financial director of Transcontainer. It is easier to carry goods inside the country. "UC Rusal has a daughter company Rusal-trans, this is a technical customer, and there is an operator - the Russian transport company," explains Maxim Khudalov, an analyst with ACRA. He also believes that UC Rusal can reduce aluminum production if it considers it unprofitable. Representatives of UC Rusal and En +, as well as Norilsk Nickel declined to comment on the situation.

The holding "Russian Machines" includes 27 enterprises in such industries as the automotive industry (GAZ Group, etc.), railway machinery ("RM Rail"), aircraft construction ("Aviakor"), as well as the production of agricultural and road construction equipment (joint enterprises with American Terex and AGCO) and gas filling solutions. The GAZ Group (the largest asset of the "Russian Machines") has contracts for assembling cars for Volkswagen, light commercial Mercedes-Benz cars and engines for another German carmaker - Daimler.

All companies associated with the "Russian machines" analyze the consequences of getting into the sanctions list, said the representative of the holding. Analyze the effect of sanctions in the Mercedes-Benz Rus, according to its representative. Representatives of Terex and AGCO did not answer Vedomosti's questions. A spokesman for Volkswagen declined to comment.

Due to the entry of Russian Machines and GAZ into the sanctions list, it is likely that the joint venture will be abolished with Terex and AGCO, as well as the termination of contracts with Daimler and Volkswagen, said Ilya Rachkov, partner of Nektorov, Saveliev & Partners: "Auto concerns, though not US residents, but can be reinsured ". But it's unlikely that partners will be hacked, Rachkov is sure: "First they will study all the" peaceful "opportunities. For example, they can ask the US authorities to make an exception for them, citing the importance of business in Russia. Or they will change the legal structure of relations, formally replacing the partner. "

Non-US counterparts of Russian companies that risk violating sanctions because of joint business with them may ask the US for a license to conduct specific activities, Bradshaw explains.

As counterparties will react, it is not clear yet, but GAZ will have unique difficulties with transactions on foreign contracts, an employee of one of the auto concerns says. GAZ, according to its own data, supplies equipment to more than 40 countries, has partners for promotion, sales and after-sales service in Africa, Latin America, Asia, Europe and the Middle East. In 2016, sales of the GAZ Group in Russia amounted to 132.7 billion rubles, in the CIS - 11.4 billion rubles, in other countries - 6 billion rubles., According to the company. Because of getting into the sanctions list, GAZ will have to give up dollars in the calculations, Rachkov points out, and it would be better not to benefit the euro - European banks may have correspondent accounts in the US, but work with safe currency, for example, yuan, he advises. "GAZ is working on an action plan to minimize negative consequences," the group spokesman said.

The agroholding "Kuban", included in "Basel", also fell under the sanctions. With proceeds of 10.8 billion rubles. in 2016 he was ranked 36th among the largest landowners in Russia BEFL (data for 2017, yet). The entry in the sanctions list will not affect the activities of the Kuban, the representative of the agricultural holding assures: among the contractors and buyers of its products there are not and there were no American companies, and the sale is mainly focused on domestic markets.

"Kuban" is selling grain to FOB, a member of a large exporter knows and the representative of the agricultural holding confirms. In 2017, Kuban, according to its own data, sold 82,000 tons of wheat abroad with all-Russian exports in July-December 2017, about 29 million tons, according to the Ministry of Agriculture. A person close to the company said: basically supplies went to Africa, there should not be any problems. In the end, you can always come up with ways to bypass, the grain trader believes, and cites as an example the story of the American Cargill, which, despite sanctions against Iran, continued to supply agricultural products there. Grain is an impersonal commodity, easily dissolves in the bulk of supplies from Russia, the grain trader observes.

Under the "Renova" sanction of Viktor Vekselberg, the consolidated financials do not disclose what the company's debt and to which bank is unknown. The site (which is now available only in Google's cache) describes the company's assets in the energy, metallurgy and engineering industries. Most of them are Russian: for example, the T-plus energy group, Kamchatka Gold, Rotek, Ural turbine plant, and UC Rusal (26.5% in the company). There are also foreign ones - machine building Oerlikon (43.04%), Sulzer (63.42%) and metallurgical Schmolz + Bickenbach (42.08%). Stake in UC Rusal Vekselberg owns through Sual Partners, along with Leonard Blavatnik (to him in Sual Partners in 2010 owned 30.6%). Lawyers believe that the latter will most likely have to request permission from the US Treasury to sell a stake in Sual Partners.

Oerlikon, Sulzer and Schmolz + Bickenbach are actively trading with the United States, with 16.1% (459 million Swiss francs), 23% (713.6 million Swiss francs) and 10.1% (271 million Swiss francs) in this market. francs).